McDonalds pay

Clare Rogers at Stuff reports:

Unionised McDonald’s staff will protest at the Queen St store in Auckland tomorrow before a countrywide strike threatened for next week. Unite union spokesman Joe Carolan said its 1500 members at McDonald’s planned to walk off the job next week over pay rates and working hours. McDonald’s had offered a 25-cent pay rise across the board, which was not enough, given the company had reported an almost $32 million annual profit, he said.

An inane comparison that tells us nothing. Tell us what the unions’ proposed pay increase would cost over the entire company, and then you’re getting a bit closer to useful information. Also tell us what that profit is as a percentage of both capital and revenue.

The proposed pay rise was less than an eighth of the cost of one of the fast-food chain’s cheapest items, a small serving of fries at $2.20.

Also a meaningless comparison, that the media parrot. And actually they have a number of items they sell for $1. But again what the hell does the price of a product have to do with how much staff get paid? By this logic staff at BMW should get paid 100 times as much as those as McDonalds, as their items costs $30,000 each.

Carolan said McDonald’s workers wanted parity with staff at KFC, where pay rates were considerably higher. For example, KFC employees received a $1 pay rise on the minimum wage after about six months in the job, compared with a 25c lift at McDonald’s.

if I worked at McDonalds and could earn more at KFC, I’d move over to KFC. I’m sure they have job vacancies come up all the time and would welcome experienced fast food service staff. Market pressure can be a very good way to get a pay increase.

According to records filed with the Companies Office, McDonald’s Restaurants made a net profit of $31.8m in New Zealand last year – flat on the previous year – as revenue edged up 2.7 per cent to $204.7m. The results are understood to include fees paid by franchisees to the company and sales at company-owned restaurants, not sales for all 160-odd McDonald’s stores in New Zealand.

Good to have some data at the end. But we’re still not told what the cost of an extra $1 an hour would be overall. Also if those figures exclude franchises, thet are of little value.

UPDATE: A reader does some calculations:

There are 160 McDonalds in NZ. A McDonald’s site for all the restaurants in Michigan says they employee an average of 61 people restaurant in Michigan. I assume this would be similar in NZ, or not far off. I can’t see why NZ restaurants would be more, or less labor intensive. That would be 9,760 employees approximately. In the US wages and benefits take up 31.9% of all revenue for the corporation and 25+% for the individually owned franchise.

I don’t know how many hours the average employee works, some are part time and some a full time, but some restaurants are open 24 hours as well. 

If you assume an average of 30 hours per employee you have added wage costs of $292,800 per week, or $15,225,600 per year. Those are approximates, but I think based on reasonable assumptions. This would effectively, based on the article you cited, mean a reduction in profits by more than 50%, all things being equal. If you assume that prices will have to rise to pay for additional wages then you can assume consumption will decline. Depending on the demand curve, which I think is somewhat flexible, sales would decline below what they would be otherwise. Given that sales in NZ McDonald’s have barely increased over the last year it could well mean a reduction in total sales and income, making the wage increase even more expensive. Both are likely to reduce the demand for workers, thus giving the increase to one class of workers at the expense of those who lost their jobs. 

I wish we got analysis like this in the media. It shows how importance context is.